Centennial Precious Metals, Inc: Serving Gold Coin & Bullion Investors Since 1973

Archive of 2007's Notable Stories and Gold News

2007

IMF says dollar losing ground in global forex reserves (AFP 12/29)
The dollar's share of forex reserves was 63.8 percent in the third quarter, compared with 65.0 percent in the second quarter and 66.5 percent in the 2006 July-September period. In recent months, several emerging-market countries have signalled their intention to further diversify their foreign exchange reserves to offset the US currency's depreciation.

Sudan's Central Bank opts for euro (AP 12/29)
A policy note circulated from the Central Bank said banks should advise account holders to commute U.S. dollar assets to other currencies and "enlighten them on the risks associated with maintaining balances in the American dollar."

Gold price set to test $1,000 in 2008 (NewsAu 12/27)
The price of gold is set to remain high in 2008, putting it on track to break $1,000 an ounce for the first time, as the yellow metal continues to offer investors a safe haven from volatile financial markets and supply remains tight...and could reach as high as $1,100 by December.

Zimbabwe inflation hits 24,000% (VOA 12/26)
An IMF official recently said Zimbabwe was heading down the same path as Weimar Germany, though if the more pessimistic current estimates are correct, the country has already exceeded the Weimar peak of 32,400% attained in 1923.

Chinese to buy gold and platinum... (AP 12/21)
The Chinese are buying gold and platinum as an investment, seeing the metals as a hedge against the declining U.S. dollar and anticipating they will rise further in price. Because of a worsening global economic outlook and financial-market uncertainty, the Chinese want the safe haven that gold and platinum offer even above Treasurys. "This past year -- rightfully so -- their belief that the U.S. dollar was and will continue to devalue ... has had the Chinese government and others continuing to purchase gold."

Gold investment seen as strong in 2008 (AP 12/14)
Analysts expect gold investment to be strong in 2008 for many of the same reasons it was robust during latter 2007 - a soft dollar, fears of inflation and flight-to-safety amid credit-market worries. JPMorgan strategist Michael Jansen added that buying of gold to insulate portfolios from dollar weakness and as a hedge against potential inflation will strengthen investment. "Gold historically has been a place to hold value, and that will continue to appeal to investors."

Helicopters start to drop money (FT 12/12)
Helicopters of five central banks are planning a co-ordinated drop of liquidity on troubled market waters. The money to be dropped now is not that large. But if this does not work, more will surely follow. The helicopters will fly again and again and again. One point is clear: central banks must be pretty worried to take such a joint action. So does the action by the central banks give us good reason to stop worrying? Only if you like huge rescue operations of incompetent bankers...

Rocket School of Economics:
Monetary Systems & Productive Assets (v.Braun 12/10)
We need to remember that the banking system is an imposition, something that has been imposed upon an already existing system of global trade. That system is alive and well and the traditional means of settlement, gold, currently, can be purchased at will. All the metals can be purchased but as I have written about before one needs to take delivery of the product rather than leave it in the hands of the magicians.

Iran has halted oil transactions in dollars (AFP 12/8)
Major crude producer Iran has completely stopped carrying out its oil transactions in dollars, Oil Minister Gholam Hossein Nozari said on Saturday, labeling the greenback an "unreliable" currency, citing "its devaluation and the oil exporters' losses."

Mortgage rate freeze reached (AP 12/6)
The Bush administration offered hope to beleaguered homeowners Thursday with a five-year freeze in loan rates for those who qualify, even as the number of bad mortgages jumped to the highest level ever. The big sticking point in the negotiations was getting investors who had purchased the mortgages after they were bundled into securities to agree to (receive) lower interest payments ... [with excpectations that] the industry would face suits from investors unhappy that the original terms of the mortgages have been modified.

The Dollar Nosedive: Why America's Currency is the World's Problem (Spiegel 11/30)
The ailing US economy seems to be driving the exchange rate of the dollar inexorably downward, with serious consequences for the global economy. Politicians and central bankers are looking on helplessly as the economic outlook worsens by the day... The potential dangers are so great because there have rarely been so many uncertainties in the world's monetary structure. No economist can confidently predict whether the dominance of the dollar, which provided relative stability in international trade after the end of World War II, is now coming to an end. And no one knows what happens next.

Florida halts withdrawals from local investment fund (Blmbrg 11/29)
Florida officials voted to suspend withdrawals from an investment fund for schools and local governments after redemptions sparked by downgrades of debt held in the portfolio reduced assets by 44 percent. "The people who withdrew were right to withdraw," said Joseph Mason, finance professor at Drexel University in Philadelphia and a former economist at the U.S. Treasury Department. "The people who trusted in the good faith of the pool's management were burned. This is a severe blow if not a death knell to the concept of state-run investment pools." Hal Wilson, chief financial officer for the school district in Jefferson County, said he had decided not to pull the district's $2.7 million from the fund, relying on assurances from the state board that the money would be secure. "I might not be able to pay our employees tomorrow," he said, referring to his $850,000 payroll. "I am sure that those money managers who withdrew all their funds are feeling really smug right now, thinking they did the right thing. But it left the rest of us holding the bag."

Subprime mortgage debt is just tip of iceberg (GlobalResearch 11/23)
Deutsche Bank got a hard shock a few days ago when a judge in the state of Ohio in the USA made a ruling that the bank had no legal right to foreclose on 14 homes whose owners had failed to keep current in their monthly mortgage payments. It is an earth-shaking precedent for all banks holding what they had thought were collateral in form of real estate property.

Treading the foothills of a gold bull market (FT 11/5)
In recent weeks, as the gold price has approached the $800 level, the rate of increase in the price, the momentum of buying interest, has slowed, one sign that a correction in the uptrend could be at hand. Even so, the low volatility and low level of public interest both suggest that even with a short or intermediate correction, we are only in the foothills of the gold bull market.

Suppy/Demand may trigger quantum upward change in the gold price (Mineweb 11/5)
Credit Suisse suggests that supply and demand factors will make their presence felt to such an extent that they "could trigger a quantum upward change in the gold price, enough to sustain a new gold price/US$ equilibrium."... "Under these circumstances, the supply-demand imbalance will begin to accelerate at an ever-increasing pace into a net deficit, which in turn, will likely put significant upward pressure on the gold price."

Subprime Outlook for the Global Economy (S.Roach 10/23)
The subprime fiasco is the tip of a much larger iceberg -- an asset-dependent American consumer who has gone on the biggest spending binge in the modern history of the global economy. Another post-bubble shakeout poses a serious challenge to the timeworn inflation-targeting approach of central banks. It also presents the body politic with a fundamental challenge to its tolerance and, in many cases, encouragement of a new asset-dependent strain of global economic growth. Subprime spillovers have only just begun to play out... Fearful of the additional Fed easing it implies, foreign investors are becoming increasingly skittish over buying dollar-based assets. The spillover effects of the subprime crisis into other asset markets -- especially mortgage- backed securities and asset-backed commercial paper -- underscore these concerns. As a result, foreign appetite for America's complex and opaque financial instruments is likely to be sharply reduced for years to come. The political winds are also blowing against the dollar.

Getting it right on Central Bank gold sales (J.Phillips 10/12)
Why the mainstream commentators have it wrong on central bank gold sales.

Why Gold Prices will Keep Going Up (SmartMoney 10/12)
In all history, on how many days was the price of gold higher than it was just yesterday? The answer is four. To be sure, on one of those four incredible days - which all occurred in January 1980 - gold closed at $850 an ounce, a substantial 13% higher than yesterday's price of $747.40. So I suppose we could say that gold is still a long way from its all-time high. But in 1980 the bull case for gold was coming to an end. Now a new bull case for gold is still young, with lots of room to run. Today's Fed is nearly blind to inflation risk, obsessed with bailing the economy out of the consequences of the subprime credit binge. It's not just the Fed, either...

Petro-market sees shift out of dollars (AP 10/11)
In one corner of the Middle East at least, it seems the petrodollar has lost its punch. "What Iran has managed to do is really reduce its exposure to dollars," said Bill O'Grady, commodities analyst at A.G. Edwards. "They managed to do it, frankly, without a lot of upset." With the dollar's value falling and trade patterns shifting, oil-producing nations are increasingly receiving deposits in euros, said David Kirsch, manager of the market intelligence service at advisory firm PFC Energy. But, he said, that is unlikely Iran's reason for pulling away from the dollar. "There is a certain an economic rationale for doing this, but the overwhelming driver pushing Tehran to do this so publicly is pressure from the U.S.," Kirsch said.

Dealing with a potential rout of the dollar (FT 10/10)
The dollar's orderly retreat could at any time change into a chaotic rout, given the uncertainties and anxieties in today's markets. The danger is enhanced as every sign ­ financial, economic and political ­ points to a dollar that will continue to drop, making a bet on a weaker dollar nearly a risk-free proposition.

Dollar takes a blow from Vietnam, Qatar (Telegraph 10/4)
Vietnam is planning to cut its purchases of US Treasuries and other dollar bonds, raising fears that Asian central banks with control over two thirds of the world's foreign reserves may soon join the flight from US assets. There have been reports that China is already pulling out of US bonds to fund its new sovereign wealth fund. Separately, the gas-rich Gulf state of Qatar announced that it had cut the dollar holdings of its $50bn sovereign wealth fund from 99% to 40%. The drastic shift by the Qatar Investment Authority is a warning that petro-dollar powers with some $3,500bn under management may pull the plug on the heavily endebted US economy.

GOLD: Time to Shine! (FS 9/13)
The modern-day monetary system is far from ideal, however we all have to live within the system and try our best to protect our wealth from the ravages of inflation. As a money-manager with the capability to invest in global assets, I have invested our clients' capital in the world of tangibles. Recently, we have added to our positions in precious metals on the belief that we could witness an explosive run-up over the coming months.

Russian Central Bank buys domestic gold (Reuters 9/10)
Russia ... will continue to build state reserves by purchasing from its main producers, a senior central banker told the Reuters Russia Investment Summit. "We are not selling gold to the market. We are buying a certain amount of gold from our producers," said Konstantin Korishchenko, deputy chairman of the central bank. "We are not the kind of investor that starts buying aggressively gold in the market. We are simply doing this very reasonably and gradually, from domestic sources," he said.

CBs worldwide pour money into banking system (Reuters 8/10)
The U.S. Federal Reserve and European Central Bank pumped money into the banking system for a second day on Friday to ward off a global credit crisis and the Fed said it stood ready to do more if needed. Their moves came after Asia central banks joined a global campaign to keep money flowing through the arteries of finance. Central banks worldwide have injected at least $323.3 billion in the past 48 hours. "The Federal Reserve is providing liquidity to facilitate the orderly functioning of financial markets," the Fed said in a statement that amounted to a promise to do whatever was necessary to keep markets from seizing up. Malaysia, Indonesia, the Philippines and Taiwan all stepped in to support their currencies by selling U.S. dollars, traders said, as escalating credit market worries hit risky assets around the region. "There's a variety of scenarios you can envision, all the way from it being a relatively contained phenomenon to something which has much broader implications that cause the world to collapse like a deck of cards."

UPDATE: DISTURBING TRENDS -- 2007
The Dollar Under Siege
by Michael Kosares
For the uninitiated, Disturbing Trends explores the primary reasons why the economy and financial markets have become so volatile and unstable. It also exposes the reader to the reasons why gold has come to play such a prominent role in the contemporary investment portfolio. For the veteran gold investor, this study serves as a refresher course on why you added gold to our portfolio in the first place. Thus far the United States has avoided paying the piper for its economic sins because of the dollar's position as the world's reserve currency - what French president Charles DeGaulle called "the exorbitant privilege." Just over the past year though, a growing list of countries have switched course and begun substituting dollar holdings with other currencies and gold in their reserves. Unless something changes, the days of "exorbitant privilege" could be suddenly coming to an end. If so, the dollar will find itself under siege like it never has before.

AUDIO: Is a world currency realistic? (npr 7/11)
In a recent article in Foreign Affairs magazine, economist Benn Steil says most national currencies should be eliminated because they end up being manipulated by politicians, and do more economic harm than good. Gold is favorably mentioned.

Zimbabwe dollar crashes (IRIN 6/25)
The country's inflation rate - the highest in the world - is officially at more than 3,700 percent, although independent economists believe the real rate of inflation is around 20,000 percent and could reach 1.5 million percent by the end of 2007. A newly resettled farmer said they knew the economy was collapsing and "a lot of the farm workers say they no longer want long-term contracts which would tie them to me; the farm workers say they would rather work for food and clothing handouts instead of money, which they say is now worthless".

USAGOLD Special Analysis - June 19th
Use Seasonal Gold Price Trends to Your Advantage
The simplicity of this seasonal trend is a useful insight for June and July bargain hunters. Over the past 35 years, this trend holds on average, and over two-thirds of the average annual gains have been registered between August and December.

Foreign banks invited to Chinese gold market (ATimes, 6/12)
Foreign banks will be able to cash in on China's growing gold-trading market after the country begins to open it up in a bid to boost the development of its precious-metal sector in a significant step toward globalizing the country's gold market. "The current problem of limited gold-trading volume and liquidity at the exchange cannot be solved by domestic banks. The participation of foreign banks can help attract foreign funds to the gold market through formal channels, which will increase the trade volume and liquidity of the market and ensure sustainable development of the market." The current turnover on the domestic exchange is too small to influence the international markets, but the opening up of the domestic gold market to foreign institutional investors represents another step in the process of liberalizing the mainland's financial sector. Consumer demand for gold in China is expected to grow continually this year because of the rising popularity of bars and coins among Chinese who consider the precious yellow metal to be a safe haven against inflation and a symbol of wealth.

China gold technicals (Zeal, 6/8)
While the stock mania in China is fascinating to study, stocks are not the only market for capital in China. Just like the rest of the world, Chinese investors have investment alternatives. One in particular, gold, is exceptionally interesting at this moment in time.  In Western stock-market history when stock manias collapse, gold tends to soar as stock investors flee the imploding bubble. Will the East mimic this behavior? With the great Chinese love for gold going back thousands of years, I suspect the Chinese investors will have an even stronger urge to buy gold when stocks crumble around them than we do in the West. Gold is the ultimate store of wealth and safe haven in any financial-market storm, and the Chinese probably instinctively realize this to a far greater degree than we ever will in the West. Odds are a major Chinese stock selloff would lead to a surge in gold demand out of China.

JPMorgan: Gold may touch $1000 (Blmbrg, 6/8)
Gold, which has risen 5.2 per cent this year, may reach $850 an ounce in the "medium term,'' on the way to $1,000, analysts from JP Morgan led by John Bridges said in the report dated June 6. "We would continue accumulating gold and silver positions looking to higher prices by year-end,'' the analysts said. "A four-figure gold price looks quite feasible to us given the tight supply demand situation in the gold market.''

USAGOLD Client Letter - June 4, 2007 Update
June Edition (by Michael Kosares)

James Grant: Gold joins the mainstream (Forbes, June)
Once upon a time gold was the sanctuary of nonconformists, visionaries, contrarians, idolators and cranks. And the gold price moved accordingly. If stocks went up, bullion went down, and vice versa. But the barbarous relic has moved ever closer to the investment mainstream... (and) a funny thing happened last winter. One day the Shanghai stock market fell out of bed, and, in sympathy, so did other world stock markets--and so did the price of gold. It fell by $23 an ounce. It could be that this uncharacteristic joining of equities and bullion was a fluke that the safety-seeking gold buyer can safely ignore. But I doubt it. The stellar returns of the postmillennial metals markets have been lost on no one. Investors have chased them, and academics have rationalized them. The trouble I see is that the opportunists increasingly outnumber the goldbugs. It follows that gold could be in for a rough patch. But I continue to believe in a sizable long-term reward. Yes, gold has had a nice seven-year run. But the monetary phase of the bull market has hardly begun. How could it have? People, for the most part, still trust the currencies in their wallets and the central bankers who print them. The day gold stops trading as a decorative asset, and begins trading as an alternative to Bernanke & Co., is the day that the gold bull run, part II, begins.
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Editor's Note: Though we agree with James Grant that monetary considerations will drive the second phase of the bull market in gold, we disagree with his assessment of the role of speculators. We would temper fears of the potential downside risks with the realization that new found wealth in places like India, China and the rest of Asia is likely to buy the dips with enthusiasm. We would also encourage our clientele to recognize volatility -- even severe volatility -- as an ever-present, even healthy, characteristic of the gold market, and not something that descends upon it from time to time without rhyme or reason. We may be in for a "rough patch" as Grant theorizes, but then again, this might be nothing more than another stop along the way of the bull market in gold, and nothing much to worry about. It is because so many now understand the long term value of gold globally that the short term should be put into its proper perspective.

Kuwait split raises questions of longevity of the dollar (FT 5/31)
by Jim Grant -- When the Roman emperor Constantine struck off a new gold coin, he expected it to give good, durable service. And the extra-durable solidus did - about 700 years' worth. Modern monetary systems have a somewhat shorter shelf life. That the current monetary system may not last for the ages was underscored the other day by Kuwait's decision to uncouple its dinar from the US dollar. For years, the two had been lashed together as a preliminary to the projected creation of a common Persian Gulf currency. But the more the dollar's value sagged, the more dollars the members of the Gulf Co-operation Council have had to absorb just to maintain the desired exchange rates. Naturally, the central banks of the participating countries did not acquire their dollars with nothing. They printed the local currencies with which to buy them and the more they printed, the more that inflation welled up. Now Kuwait has chosen to go its own way, leaving Saudi Arabia, Qatar, the United Arab Emirates and Bahrain to ponder their tolerance for open-ended dollar-buying. Little Kuwait just might be the herald of big change, both in the dollar's fortunes and the world's monetary organisation...more

Europe CBs to sell less gold than pact allows (Reuters 5/31)
Europe's central banks are again likely to sell less gold this year than an agreed annual limit of 500 tonnes, despite a pick up in recent weeks, analysts say. The pact was first negotiated eight years ago to stabilize prices when gold was languishing below $300, partly because of frequent central bank selling. The current pact, agreed in 2004, raised the limit on gold sales over five years to 2,500 tonnes from 2,000 tonnes in the 1999-2004 period. "Overall, CBGA sales are most unlikely to be maintained at this recent rate. However, we could end the agreement year a bit above 400 tonnes, rather than at or below the level," Philip Klapwijk, chairman of metals consultancy GFMS Ltd, said. "I personally expect they will (renew the pact in 2009), as it has for them neutralized what was a controversial issue, and the market has come to expect it. However, it might be on different terms," said Matthew Turner, precious metals analyst at Virtual Metals.

USAGOLD Market Update - May 18th
Gold eclipses major currencies as inflation hedge by George Cooper.
I submit that the price of gold is a truer gauge of inflation than any government index, and thus a truer hedge. A large section of the world's population apparently agrees since gold has been rising internationally in terms of all major foreign currencies. (The accompanying charts of gold in euros and British pound sterling which begin in 2002 are just two representations of the global trend.) It won't take long until the inflation-driven move out of paper investments and into gold accelerates...more

McEwan sees up to $5,000 in 2010
May 15 (Reuters) -- James Moore, analyst at TheBullionDesk.com, said in a note that gold's movement would continue to be mixed for the near future as the market remained pressured by funds' long liquidation but underpinned by bargain hunting by physical buyers and investors. Robert McEwen, chairman and chief executive of Canada-based U.S. Gold Corp. said on Tuesday that gold prices could trade above $2,000 per ounce in 2010, possibly reaching $5,000...more

USAGOLD Client Letter - April 2007 Update (II)
Structural shift in gold, money markets by Michael Kosares.
"April is traditionally a quiet time in the gold market, but not this year. Suddenly, the gold market time bomb appears to be on a short fuse."

Ounces aren't just ounces (Charnock 4/23)
Ounces are vastly different if they are paper. Paper is not gold and never will be even if the futures markets can temporarily be "the tail that wags the dog" by way of influence. The physical market has to regain the upper hand at some point due to rarity; basic supply-and-demand reality. The above-ground ounces being sold through the late nineties were very very cheap in historic terms. The ounces below ground were sold (hedged) at what seemed like a good price at the time. However, by the time the ounces were to be finally extracted from the earth, this turned out to be below the ever-moving cost of production (as some now extinct miners have found out since to their grief and demise.) Ounces are not just ounces if they are still in the ground.

India's appetite for gold insatiable as ever (Reuters 4/22)
It's seen as a portable form of wealth in a country where stocks and bonds are sometimes viewed with suspicion. As the Indian economy steams ahead by more than eight percent annually in the past four years, an ever increasing stream of money is going into gold purchases. Over generations, Indian households have accumulated an estimated 15,000 tonnes of gold worth $320 billion -- 40 times the amount of gold held by the country's central bank and nearly double the amount held by the U.S. central bank. "Gold is considered an investment for life, so Indian women continue buying it, to be given away to their daughters or grand-daughters," said Rashmi Sanyal, a journalist in New Delhi. Gold is important for people hit by floods that kill hundreds and displace millions in India every year, as it means villagers faced with the dangers of flooding can carry their wealth with them...exuberance.

USAGOLD Client Letter - April 2007 Update
Bull, Bear or... Dragon market??? by Michael Kosares

Dollar perched precariously on a precipice(PSchiff 4/14)
Looming large is the 80 level of the U.S. Dollar Index which has stood as long term support for almost thirty years. This week, the Index broke below 82, and is sinking fast. When this critical level is breached, look out below. Without any support beneath it, the dollar could literally fall off a cliff.

Gold Bull/Bear Duel(MotleyFool 4/9)
Over the past five years, returns in precious metals have left those of the stock market in the dust. In that time, gold has advanced 140% versus a gain of only 29% in the S&P 500. Gold's returns have been strong over the past 18 months as well -- the metal is up by roughly 41% during that time. Looking beyond the recent gains, we see other reasons to be bullish about gold for the foreseeable future. First, paper currencies will continue to decline in value and continually erode returns from cash investments. Second, while gold has historically underperformed the market, the current environment has all the ingredients for continued gains in gold. The world is awash in cash, and the result will be higher prices for everything -- except stocks. For investors in the stock market, gold has a wonderful attribute -- when stocks slide, gold often shines. As shown above, this has been true during the past five years, and it was true in the '70s, when gold investors made big money and stock investors faced big losses. This is why I love gold as a compliment to my portfolio of stocks. Furthermore, current investment in gold is a tiny fraction of the total investment universe. If the market experiences a bit of fear or increased inflation, I expect this demand to increase dramatically. ...the price of gold is still far from its all-time high of $850 per ounce, set in 1980. On an inflation-corrected basis, gold would have to soar to around $2,275 an ounce to reach the same level of

Metal versus mining stock
April 5 (MarketWatch) -- "Investing in gold stocks has been challenging for the past nine months," said Frank Holmes, chief investment officer for U.S. Global Investors. "Even though gold-bullion demand remains healthy, prices are not high enough for many companies to generate returns on capital greater than their cost of capital." And "many gold-mining companies have experienced delays and disappointments in their project development," he said in recent comments to clients. "While this is good for gold prices due to less supply, it hurts short-term performance for gold stocks."

Iran quits dollar for 60% of oil revenue (Reuters 3/22)
Iran, embroiled in a nuclear row with Washington, is asking more clients to pay for oil in currencies other than the dollar and 60 percent or more of its crude income is in other units, an official said on Thursday. Hojjatollah Ghanimifard, international affairs director of state-owned National Iranian Oil Company (NIOC), told Reuters almost all of Iran's European clients and some of its Asian customers had accepted making payments in non-dollar currencies.

Cramer emphasizes that markets are moved on mechanics (driven by falsehoods) rather than fundamentals
A refreshingly candid 'Wall St. Confidential' interview with former hedge fund manager, Jim Cramer, who puts forth an effort to explain what hedge funds do as a standard practice. Says Cramer: "What's important when you're in that hedge fund mode is to not do anything remotely truthful -- because the truth is so against your view that it's important to create a 'new truth' -- to develop a fiction. [...] Mechanics are much more important than the fundamentals... who cares about fundamentals [...] but look what people can do -- I mean, that's a fabulous thing. The great thing about the market is it has nothing to do with the actual stocks. Now, look, over maybe two weeks from now the buyers will come to their senses and realize that everything that they heard was a lie [...] it's just fiction and fiction and fiction. I think it's important for people to recognize that the way the market really works is to have that nexus -- of hit the brokerage houses with a series of orders that can push it down, then leak it to the press, and then get it on CNBC (that's also very important,) and then you have kinda a vicious cycle down. It's a pretty good game."

Qatar triples gold reserves to protect against dollar (Blmbrg 3/15)
Qatar tripled its gold reserves in January from the previous month to protect against a weakening dollar. The Persian Gulf state, owner of the world's largest single natural gas field, increased its holding of gold to 158.1 million Qatari riyals ($43.4 million) from 44.3 million riyals in December, the Qatar Central Bank said in its monthly bulletin. "Qatar and other central banks have indicated that they are looking to diversify their reserves as the dollar weakens, to protect the size of their reserves in non-dollar terms..."

Gold market 'inextricably changed' (miningmx 2/23)
The astounding fact is that the world's primary production of gold has been in supply deficit, with minor exceptions, for the last 15 to 20 years. That means not enough new gold is being mined to feed demand. Take 1997 which recorded a primary gold supply deficit of 1,000 tonnes. Why then the 20-year long gold bear slide? According to David Davis, a gold analyst for Credit Suisse, secondary supply of gold from central banks filled the supply deficit. Today, this is changing as the difficulty of finding new primary supply increases. Geopolitical disorders and US dollar distress are other factors changing the playing field. For years, hopelessly convicted gold bulls have been talking (raving) about a runaway gold price. They could be right.

USAGOLD Client Letter - February 2007 Update
(What is going on with gold? by Michael Kosares)

Special Contributor -- Divorced from Reality (vonBraun 2/14) -- The routine is now in full swing as the comedians try to out-do each other, while confusing the general public with flashing lights, sound bites, color coded stage sets and lots of fancy numbers flowing across people's screens. The one thing missing is of course settlement. The "official" means of settling these transactions was divorced from the transactions themselves when the gold window was closed. Since August of 1971 gold quoted in US dollar terms has increased from $35 per ounce to its current level of $660, which suggests that "unofficially" it is still the favored principal unit of account and is likely to continue to remain as such.

Prepare for a flight to gold (MoneyWeek 2/13)
Gold's recent return above the $650 level is a key development in the metal's bull market. Just how high could gold go this year - and what's the small cloud hovering on the horizon? We have no doubt that of all the flights to quality that might take place probably this year, the one to gold is likely to be the most breathtaking.   This bull market is real and the outlook is excellent.  The great thing about consolidation periods such as these is that the majority of investors have strong hands - that protects the downside.

Inflation whispers to the world "Buy gold" (DR 2/13)
To remind you of the horror of the inflation millstone, we just saw that money supplies around the globe have all been increasing at 10% or more, meaning that an opportunity to buy gold is whispering sweetly in your ear.

Graph: Inflation-Adjusted Gold (USAGOLD 2/8)
We are often asked the question, "Is gold still a good buy at current prices?" This chart, showing the inflation-adjusted price of gold from 1970 to present, answers that question with a convincing "Yes!"

Murenbeeld: Dollar diversification will turn to gold (Mineweb 2/6)
"Indications are that there will be further diversification away from dollars, as there are fears of further dollar currency declines and geopolitical trends, such as anti-US sentiment in the Middle East, do not exactly support the currency," Murenbeeld explained. "But other markets are not cheap, and gold is now cheap at ten barrels of oil for an ounce and in terms of the cost of financial assets." U.S. monetary policy is likely to be eased in future, as budgets are stretched as the baby boomers retire, causing fears that the US economy will slow down, he said.

Rogers: More Funds May Collapse After Amaranth (Reuters 2/5)
"There are lots of hedge funds that are going to be in trouble," Rogers told journalists. "I don't know who has got what positions and in what, but I know when some of them start blowing up, it's going to have huge ramifications," Rogers said. "When Amaranth blew up, it drove natural gas down to absurd prices and it was a spectacular buying opportunity for those that were still solvent and had their wits about them. ... There's going to be a gigantic shakeout when that whole mess starts coming apart. This has to end badly." He said he had no money invested with hedge funds.

Golden Suspicions (MktWatch 2/5)
Veteran Market watcher Richard Russell of Dow Theory Letters does not hesitate to question the character of Friday's sell-off: "Ironically, no sooner did gold bullishly break out of its fanline pattern, than the metals were whacked. And I wonder, was this just the action of traders taking profits on a breakout or was this the result of someone or some group dumping a load of gold on the market in an attempt to 'stem the bullish gold tide'? In the end, it really doesn't matter..." Meanwhile, 13-D Research suggests commodities could be starting a "huge rally, led by gold."

IMF looks to gold for help (1/31)
Proposes specially constructed sale of about 400 tons of gold to help fund its activities to mitigate budgetary shortfall due to falloff in lending activity and associated revenue.
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Michael Kosares comments on the IMF proposal

Gold, fiat money... week in review (Mineweb 1/26)
Anthony Fell, chairman of RBC Capital Markets and former President of the Royal Bank of Canada climbed into the state of currencies worldwide and put forward the place of gold as the safe haven against currency collapse in a big way. What is significant here is not that this has been said, but who it has been said by. Bankers have a tradition of being cautious in both their dealings and their utterances, so when someone like Fell breaks ranks and slates government money supply in this manner, and couples it with a paean to the yellow metal, one has to sit up and take notice. "At the current level of about $625 per ounce, gold has risen about 250 percent over the last five years. Nevertheless, I believe gold bullion is now in the very early stages of a long-term secular bull market which will carry it to much higher levels over the coming decade." At the end of his presentation, Fell went on to say "I have always been told to buy quality assets that are vastly undervalued and that have been ignored by the marketplace for a prolonged period. Notwithstanding the modest rise in gold prices over the past few years, that is where gold bullion is today, and it represents a great opportunity."

Gold Fields pay $528m to kill WA hedge book (Mineweb 1/26)
...the very best of news is that the Western Areas hedge book, the most toxic known in the history of gold mining, is now dead. Companies can write hedge books for many different reasons; normally the objective is to raise cash in the present tense, like raising a mortgage bond on property, and pay it off in future. Gold diggers typically sell gold ounces now, ounces which are then only mined out and delivered in the future. Hedging is very unpopular ... since it tends to depress gold prices.

Globalization risks 'Western backlash' (Times 1/24)
Mounting anxieties among the middle classes across the Western world over threats to their livelihoods from globalisation and the rapid economic rise of India and China risk triggering a ferocious social and political backlash, some of the world's leading economists gave warning yesterday at the World Economic Forum's annual meeting in Davos. These trends were being amplified by the integration into the world economy of India and China -- the rise of these twin economic powerhouses was "the greatest economic event since the Renaissance and the Industrial Revolution". Prof Shiller and other panellists sounded an ominous warning over the risk that a backlash across Western electorates could spark social unrest and a retreat by leading developed economies into protectionism. He called for governments to raise taxes on the wealthy to counter this danger, so that the proceeds could be used to ease the economic strains now afflicting large sections of Western societies and fostering increased inequality. He said the political challenge of tackling these issues was all the more pressing since "once inequality increases it's a problem that will be with us forever". Economists said the globalization was also raising other risks to prosperity, with mushrooming capital markets creating escalating dangers from excessive use of leverage by financial institutions including hedge funds. Prof Roubini said that the very rapid expansion of credit through derivatives markets was heightening the threat of "something ugly and systemic happening".

Gold forecast $750 an ounce (Telegraph 1/17)
The majority of the world's top metal experts, 29 prophets polled by the London Bullion Market Association in its annual forecasting contest, think that gold will reach 25-year highs this year, surpassing the brief peak reached in the speculative surge last spring. Ross Norman, director of TheBullionDesk and winner of the last year's prize (a gold bar), said gold would reach $850 an ounce, up from the current price of $628. "We remain manifestly bullish for gold but this is the year that is going to separate the men from the boys because the old factors of supply-demand we all used to look at are no longer the real drivers," he said. Fifteen of the 29 analysts said gold would reach $750 an ounce or more this year...

USAGOLD Client Letter - January 2007 Update
(by Michael Kosares) - Includes MK's goldprice forecast for 2007.

Commodities rally is intact, says Deutsche Bank (FinEx 1/16)
Deutsche Bank AG, Europe's biggest securities firm, said falling commodities prices in the past month don't indicate the end of a rally that began five years ago. Commodities prices are undergoing a "recurrent correction in a continuing bull run," and could stay high for an extended period, the bank's Michael Lewis, Peter Richardson and other analysts said in a January 12 report. Prices of nickel, zinc, gold and grains could rise further this year, the bank said. Gold prices should gain later in the year as Deutsche expects a weakening dollar will lead investors to find the precious metal more attractive as an alternative investment. Jewellers and fabricators will also buy more of the metal, the bank said, predicting that gold prices will average $725 an ounce in 2007...

Shortage of coins hits gold market (1/15)
Discerning gold buyers have to make do without coins these days due to shortage in the local market, as the price of yellow metal again started increasing after a few days' stability. Industry sources yesterday said there was a short supply of gold coins primarily due to their heavy demand in Dubai, the main regional source for gold. The manager of a leading Doha jewellery shop told the Gulf Times yesterday that gold coins were not available in most city outlets now. Sources said the greatest demand is for gold coins weighing 8gms or a sovereign. Industry sources said the business seen since mid-November was sort of "unprecedented".

China gold trade jumps (1/13)
In 2006 turnover in the precious metal reached 194.75 billion yuan, up 82 percent over 2005. Since the Shanghai Gold Exchange started operation in Oct. 2002, gold trading has become one of the preferred investment options of Chinese citizens.

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